What Treasury Prime’s integration with Jack Henry tells us about how BaaS is evolving

For much of 2022, it appears Treasury Prime has been on a mission to integrate with the leading core banking technology providers. After announcing a collaboration with FIS in May, the firm announced that it has been accepted as a Jack Henry vendor late last month.

What does this approach by Treasury Prime – an established provider of open banking technology – say about the embedded finance industry's evolving distribution model?

Before we enter the trend-level conversation here, let’s get the news out of the way.

Treasury Prime accepted into Jack Henry Vendor Integration Program

The agreement between the two firms essentially boils down to the fact that Jack Henry clients can now deploy Treasury Prime's BaaS technology right off the core. The former’s focus on standardization makes deployment fast, easy, and seamless, but it also means that integrating with Jack Henry takes time, and a whole lot of technical work.

“The agreement was months in the making and involved intensive conversations around technical syncs, bank contracts, planning, and the final build,” Chris Dean, CEO of Treasury Prime, told Tearsheet. “What’s exciting is that we now have a much more streamlined implementation process that will benefit future Jack Henry banks by allowing them to get their BaaS program up and running faster.”

To really break it down, Jack Henry clients can onboard and integrate Treasury Prime’s tech within a few weeks now. Then they’re all set to start rolling out embedded products to their enterprise or fintech clients. 

How did the partnership come about, though?

The first order of business for Treasury Prime was to convince the Jack Henry team that such an integration was even worth pursuing. The appeal behind open finance for its clientele wasn’t lost on Jack Henry, so the work for Treasury Prime here was to demonstrate their abilities and value proposition.

Once that was out of the way, the conversation entered the technical field, where the two held meetings to sort out what would be required to integrate the Treasury Prime systems. Upon agreement, they were given access to Jack Henry’s full technical documentation, and their engineers built the integration.

Upon successful integration and testing, it was made possible for Jack Henry banks to submit tickets to install Treasury Prime APIs in their environments. All the engineering was done in record time, with the integrations completed in just one month, compared to the usual 3-6 months it takes for Jack Henry to integrate with outside vendors. 

I know what you’re thinking – does Treasury Prime’s product change as a result of this re-engineering?

“Our product doesn’t change at all. The main premise of Treasury Prime is that we integrate directly with all of our bank partners’ cores to facilitate real-time, trusted and reconciled transactions through API software. Our integration with Jack Henry allows for those connections to be made faster and in a more defined way for those banks on Jack Henry cores,” Dean replied.

Treasury Prime is unique among BaaS providers in that it integrates with bank cores directly, and this allows transactions to be reconciled in real time. So throughout the day, as transactions occur, it simultaneously makes requests to the bank’s core to update the movement of funds.

Third Coast Bank SSB – a Texas-based FI with $3.36 billion in assets – has become Treasury Prime’s first client through Jack Henry.

BaaS' evolving distribution models

A recent report by Bain estimates that the embedded finance industry will swell up to $7 trillion as soon as 2026. That’s simply because it's founded on an idea that produces great results. In the words of my interviewee: for banks, adding BaaS is the modern-day equivalent of adding branch locations – without much of the capital expenditure. Not only does it allow them to increase their revenues and keep them at par with industry development, but it also reduces the cost of new deposits. Oliver Wyman estimates that with a new BaaS technology stack, the cost of acquiring a customer for banks ranges from $5-35, down from $100-200.

In such an environment, it is ever more interesting to see how BaaS providers distribute their product.

Distribution of BaaS offerings usually happens directly from vendor to client. Providers have a few banks on the backend powering their offerings, and sell directly to consumer-facing brands. Treasury Prime’s integration with Jack Henry is different. The provider here is going through sort of a middleman and selling to banks, who may then go on and deploy the services for consumer-facing brands.

“These bank core integrations are the future for us because we are building a network model that is unlike other BaaS companies. Our API connects multiple banks on one end to fintechs and enterprises on the other. Other BaaS companies have only one or a handful of bank partners. We have 14 banks in our network, and this number is growing all the time,” Dean elaborated.

This approach is unlikely to work for the entire industry. For firms like Treasury Prime, though, a partnership with bank core companies is part of a bigger vision. The bigger vision here is the ‘network effect’.

The network effect starts gaining momentum when a critical mass of entities are using an offering in a variety of ways, according to Dean. It may then become a fertile breeding ground for innovation – enabling banks to be more profitable and businesses more nimble.

Through a single platform, companies that partner with Treasury Prime can now access banking services across all of the banks in their network to customize a solution that works best for their business. So, a fintech can open checking accounts with one bank, and offer cards through another bank, to take advantage of the best rates for the most flexibility and scalability.

“Every time a new bank, fintech, or enterprise business joins the network, it becomes more powerful. And every time the network becomes more powerful, more want to join. It’s the same network effect we’ve seen with other technologies for decades, if not centuries,” Dean said.

The next big thing in embedded finance?

*drum roll* 

Compliance.

I agree with Dean when he says it's not the sexiest thing, but it definitely is an integral thing. The entire embedded paradigm is built on bank-fintech partnerships, and as regulators turn their focus to this arena, it is ever more important that those partnerships are compliant with regulations.

Regulators really have been knocking on embedded doors, making it clear that operations and consumer safety is of uber importance, and that growth must be managed wisely. They plan to proactively enforce rules and protect end-user deposits, and penalize those who haven’t adequately established compliance with government safeguards. Figuring out how to navigate these regulations will take a deep understanding of the banking and financial system.

“Some fintechs would rather outsource their compliance duties to the BaaS company, but this can be risky,” Dean said. “Any company that wants to leverage the benefits of embedded finance needs to set up a proper compliance program and not take shortcuts.”

As the embedded finance industry shapes up to maturity, excitement hasn’t died down, though the suit-laden world of finance has begun peeking in. You might simply be paying off your Uber app with a tap after a wild night out, but as the suit men would rightfully point out, that’s still serious business.